Markets are Keying on the Building blocks to Efficiency
See Monday Morning trading updates below:
Regardless of how the bears want to spin the story, the fact is 3 month interest rates are not going to 6.0 %. The FED may raise rates 0.25 at this week’s meeting but all that means is that they will just have to back-off as market rates show they are happy with 3.75 %. over the next few months. See chart at bottom of this post for my projection through the end of July.
The stocks that put in a rally this past week are telling a story. They are the building blocks that embrace Tech innovation as we move into the New Economy. APPL didn’t rally last week because teenagers want a newer faster phone to ply tik-tok, it rallied because it is the core building block to a more efficient economy. META didn’t rally because people want to join Facebook, META rallied because of its tech innovative group including AI. Chips are probably telling the biggest story as they are the Core to the whole movement, NVDA is not rallying because people are wanting to mine more bitcoin.
As an aside, the big holders of bitcoin have finally seen what role it plays in a financial crisis (it is a superb hiding place), and now are probably looking for suckers to sell to, suckers that will have to hold the coins until the next financials crisis four or five years from now.
As this first stage to the New Economy unfolds, some of the second and third stage pieces had selling pressure. Infrastructure kind of stocks like CLF and CAT, and the Climate Tech areas like Solar and EV’s took a hit. In a sense these kinds of stocks are now probably value plays for the coming economic wave.
To me, consumer stocks are not going away, Americans still like and need to buy stuff, so stocks types like Walmart and Lowes are not going to be the focus but will tag along.
My vision of a market basket interest rate plot through July 2023 (30Y+10Y+05Y+02Y) that closed at 3.605 last Friday.
Trading notes on Monday morning:
The market nervousness that the Climate Tech trading model was picking up on last Friday morning has appeared to subside as the model removed hedge trades and is adding long trades in EV and Solar this morning.